Report: Life Sciences IPOs the Big Kahuna

August 14, 2014

In the News Profile

​Fenwick & West securities and corporate finance co-chair Jeff Vetter was interviewed by Fox Business network’s Maria Bartiromo regarding the latest IPO Survey he co-authored with corporate partner Dan Winnike. The survey found that initial public offerings from life sciences companies outnumbered technology IPOs in the first half of 2014.

“For IPOs in technology and life sciences we’re seeing just a significant increase in deals,” said Vetter, noting that more IPOs took place in the first half of 2014 than almost all of 2013 and probably since the dot-com bubble.

When asked why life sciences IPOs were surging, Vetter said, “I think the life sciences market has been much stronger since 2013, so this has been going on for quite some time."

“I think they’re seeing good valuations in this space, as well," he added.

Bartiromo asked whether some technology companies’ IPO valuations had been priced incorrectly, leading to poor stock performance after their market debuts.

“In the tech space in the first half you’ve seen a number of companies trade up,” Vetter replied. “In fact, almost every tech IPO in the first half traded up. You’ve seen a few since that [period] trade down a little bit. And in the life sciences, you did see maybe about a third of them actually trading down. That could lead you to think that perhaps the deals were overpriced at the time….But in the tech space, it’s been mostly trading up.”

Bartiromo also queried Vetter on the volatility seen in post-IPO tech stocks after the lockups expire on sales of stock by pre-IPO shareholders.

“Normally that’s when you see a big overhang of shares that come off, 180 days after their IPO,” Vetter answered. “Just a simple supply-and-demand issue. You do see downward pressure around the time of the lockup, and we certainly saw that in the first half.”

As for future opportunities, Vetter said he expected to see a number of additional IPOs after Labor Day, when market conditions typically improve from a summertime slowdown.

“We have a lot of companies that are through the SEC process and sort of waiting to launch their deal, so we are actually hopeful that the fall, particularly post-Labor Day or maybe even a little later, will be a pretty big IPO time," he said, adding that a larger than usual portion would likely be cross-border IPOs.

“Almost 20 percent of the IPOs in the first half [of 2014] were from outside the U.S.,” Vetter observed, “and I think we’ll probably see that trend continue, as well.”